Reporting Form GRF 400.0

Statement of Risk by Country

Instruction Guide

Introduction

GRF 400.0 – Statement of Risk by Country provides selected information of business written by authorised general insurers outside Australia; namely:

• premium revenue;

• reinsurance expense;

• claims expense;

• reinsurance recoveries;

• investment income;

• unearned premium liability;

• outstanding claims liability;

• borrowings/loan capital;

• deferred reinsurance expense

• deferred acquisition costs; and

• investments.

This form only needs to be completed where the insurer has business operations outside of Australia (i.e. where they have items of income, expense, assets, liabilities or capital outside of Australia as defined in this instructions set).

Audit requirements

The information provided under the form is not required to be audited and has been exempted from the definition of ‘yearly statutory accounts’.

Reporting entities

Forms are to be completed for the following reporting entities where appropriate:

1. Branch operations of a foreign parent insurer (reference to licensed insurer in the form means total operations of the branch, excluding the parent operations);
2. Authorised insurance entities, including mutual entities (reference to licensed insurer in the form means total operations of the licensed entity); and
3. Authorised reinsurance entities (reference to licensed insurer in the form means total operations of the licensed entity).

Basis of preparation

In completing this form, unless otherwise specifically stated, insurers are recommended to adopt the measurement and recognition requirements as required by the prudential reporting framework, as appropriate (i.e. outstanding claims provision and premium liabilities).

Unit of measurement

This form is to be presented in Australian currency, rounded to thousands of dollars, with no decimal place.

Amounts denominated in foreign currency are to be converted to AUD in accordance with AASB 121 ‘The Effects of Changes in Foreign Exchange Rates’ (AASB 121).

The general requirements of AASB 121 for translation are:

1. Foreign currency monetary items[1] outstanding at the reporting date must be translated at the spot rate[2] at the reporting date.
2. Foreign currency non-monetary items[3] that are measured at historical cost in a foreign currency must be translated using the exchange rate at the date of the transaction.
3. Foreign currency non-monetary items that are measured at fair value will be translated at the exchange rate at the date when fair value was determined.

Transactions arising under foreign currency derivative contracts at the reporting date must be prepared in accordance with AASB 139 ‘Financial Instruments: Recognition and Measurement’ (AASB 139). However, those foreign currency derivatives that are not within the scope of AASB 139 (e.g. some foreign currency derivatives that are embedded in other contracts) remain within the scope of AASB 121.

For APRA purposes equity items must be translated using the foreign currency exchange rate at the date of investment or acquisition. Post acquisition changes in equity are required to be translated on the date of the movement.

As foreign currency derivatives are measured at fair value, the currency derivative contracts are translated at the spot rate at the reporting date.

Exchange differences should be recognised in profit and loss in the period which they arise. For foreign currency derivatives, the exchange differences would be recognised immediately in profit and loss if the hedging instrument is a fair value hedge. For derivatives used in a cash flow hedge, the exchange differences should be recognised directly in equity.

The ineffective portion of the exchange differences in all hedges would be recognised in profit and loss.

4. Translation of financial reports of foreign operations.

A foreign operation is defined in AASB 121 as meaning an entity that is a subsidiary, associate, joint venture or branch of a reporting entity, the activities of which are based or conducted in a country or currency other than those of the reporting entity.

• Exchange differences relating to foreign currency monetary items that form part of the net investment of an entity in a foreign operation, must be recognised as a separate component of equity.
• Translation of financial reports should otherwise follow the requirements in AASB 121.

Reporting period

Insurers are required to report the information in the reporting form on an annual basis.

• The annual information is to be completed in respect of the financial year of the insurer.
• The financial information requested in this form is to be reported as at the last day of the reporting period on a financial year to date basis of the insurer.

Reporting lag

This form must be lodged for each of the reporting units within the number of business days after the end of the quarter as set out in Reporting Standard GRS 400.0 Statement of Risk by Country.

Specific instructions

The appropriate information is to be reported by country or geographic region specified on the form. This is to be reported according to where the items of income/expense are on risk, assets are invested, and liabilities are located. Enter the relevant details for each country as appropriate.

1. Premium Revenue - Direct & Inwards reinsurance

This is the premium revenue as required by the APRA forms (refer to instructions GRF 310.1 Premium Revenue and Reinsurance Expense). It is to be reported in respect of total direct business and inwards reinsurance business.

Premium revenue is to be reported in accordance with AASB 1023 ‘General Insurance Contracts’ (AASB 1023) (i.e. earned and unearned components).

2. Reinsurance expense - Direct & Inwards reinsurance

This is the reinsurance expense as required in form GRF 310.1 Premium Revenue and Reinsurance Expense. It is to be reported in respect of total direct business and inwards reinsurance business.

Reinsurance expense is to be reported in accordance with AASB 1023 (i.e. it is to be amortised in accordance with the pattern of reinsurance service received).

3. Claims Expense - Direct & Inwards reinsurance

3.1 Relating to current and prior years

Represents claims expense in relation to claim payments made in the current year and movements in the outstanding claims provision (i.e. relating to current and prior years) as recognised in GRF 310.0 Statement of Financial Performance.

4. Reinsurance recoveries revenue

4.1 Relating to current and prior years

Report the reinsurance recoveries that relate to claim payments made and movements in the outstanding claims provision as recognised in GRF 310.0 Statement of Financial Performance.

5. Investment Income

Include investment income as recognised in GRF 310.0 Statement of Financial Performance.

6. Amounts recoverable on reinsurance contracts and outstanding claims

Report the value of amounts recoverable on reinsurance contracts and outstanding claims.

7. Deferred Acquisition Costs

Report deferred acquisition costs as recognised in GRF 300.0 Statement of Financial Position.

8. Deferred Reinsurance Expense

Report deferred reinsurance expense as recognised in GRF 300.0 Statement of Financial Position.

9. Other reinsurance assets

Report the value of all other reinsurance assets (refer to instructions for GRF 301.0 Reinsurance Assets and Risk Charge).

10. Investments

Report the value of the investments. The total amount must reconcile with assets backing insurance liabilities (related to GRF 140 series of forms) reported as current and non-current assets in GRF 300.0 Statement of Financial Position.

11. Other investments

Report investments that do not constitute assets backing insurance liabilities attributable to the respective countries listed. The total amount must reconcile with other investments as reported in GRF 300.0 Statement of Financial Position.

12. All other assets

Report the value of other assets (other than those listed above) attributable to the respective countries listed in the form. The value of ‘All other assets’ must represent the remaining total assets of the reporting insurer.

13. Total assets

Represent the total assets of the reporting insurer. This must reconcile with the total assets as reported in GRF 300.0 Statement of Financial Position.

14. Unearned Premium Liability

Report unearned premium provision as recognised in item 17 ‘Unearned Premium Liability’ GRF 300.0 Statement of Financial Position.

15. Outstanding Claims Liability

The amount reported is to be measured in accordance with AASB 1023. The total amount must reconcile with the total amount reported at item 16 ‘Outstanding claims liability’ in GRF 300.0 Statement of Financial Position.

16. Borrowings / loan capital

Report the carrying value of any amount borrowed.

17. Other

Report the value of other liabilities (other than those listed above). The value of ‘Other’ must represent the remaining total liabilities of the reporting insurer.

18. Total Liabilities

Represent the total liabilities of the reporting insurer. This must reconcile with item 24 ‘Total liabilities’ reported in GRF 300.0 Statement of Financial Position.